HARTFORD — Hospitals would pay more in state taxes, and some low-income parents would no longer be eligible for Medicaid, under Gov. Dannel P. Malloy's proposed budget.

The Malloy administration says the hospitals will recoup enough revenue from an expanded Medicaid population through the Affordable Care Act to cover a higher "hospital provider" tax, first levied on them in 2012. Hospitals, however, say they are being squeezed by extra charges that will not be fully recovered by caring for Medicaid patients.

Malloy's budget also calls for $44.6 million in cuts to the Medicaid program, which would remove an estimated 34,200 adults from the HUSKY A Medicaid plan.

The proposals were announced Wednesday as part of the governor's overall budget for a two-year period starting July 1.

The provider tax is a percentage of a hospital's net revenue in a given year. The governor is proposing changing the base year on which the tax rate is calculated, from 2009 to 2013.

"We are updating the provider tax," Benjamin Barnes, Malloy's Secretary of the Office of Policy and Management and budget manager, told hundreds of media, lobbyists and government employees gathered Wednesday morning in the Legislative Office Building in Hartford.

Gov. Dannel P. Malloy presented his Biennial Budget plan Wednesday to the General Assembly in the Hall of the House at the state Capitol.

"Rather than using 2009 revenue, we are using 2013 hospital revenue," Barnes said. "That has the impact of raising the hospital tax by $165 million. That $165 million will be returned through supplemental changes for the hospital industry."

The provider tax is expected to bring in $514.4 million annually in state tax revenue, up from $349.1 million.

The budget also calls for raising the tax rate on outpatient services, 3.83 percent, to match the rate on in-patient services, 5.5 percent.

If the governor's proposal makes it through,the Connecticut Hospital Association said, hospitals will be squeezed financially.

WATCH: With Deep Cuts Looming, Lobbyists Work Legislature On Budget Day

Gov. Dannel P. Malloy unveiled a proposed $40 billion plan Wednesday that would cut budgets to some state agencies at the Capitol.

Gov. Dannel P. Malloy unveiled a proposed $40 billion plan Wednesday that would cut budgets to some state agencies at the Capitol.

"Today's proposed budget, which would broaden the hospital tax and impose additional cuts, would endanger hospitals in our state," Jennifer Jackson, CEO of the Connecticut Hospital Association, said in a statement. "We instead need to work together to develop strong public policy to achieve a sustainable health care environment in Connecticut."

Many states charge a tax on clinicians in hospitals as a way to generate state funds and to match them with federal funds, which allows a state to get additional federal Medicaid dollars, according to the National Conference of State Legislatures.

"In a majority of cases, the cost of the tax is paid back to providers through an increase in the Medicaid reimbursement rate for their patient treatment and services," the conference of legislatures wrote in a July 10, 2014, analysis of health provider taxes and fees.

A state can impose a provider tax and return some or all of the revenues to the hospital providers through Medicaid payments for patient care, and the state receives a federal match for the payments, according to the conference of legislatures.

However, the hospital association is urging elected officials not to impose new burdens on hospitals: "We ask that they consider what is needed to ensure that hospitals can continue to provide patient care for generations to come, and remain the economic cornerstones of their communities."

The association said hospitals are facing legislative proposals that amount to unfunded mandates, which add to their financial challenges.

Hartford HealthCare, parent of Hartford Hospital and several others in the state, said in a statement: "The governor has a very difficult task and during this time, we appreciate his strong leadership. While it is too soon for us to comment on specifics, we do have grave concerns about how this might affect the communities we serve. These proposed reductions come at a time when our state's hospitals are in such fragile financial health. We are deeply concerned about the proposed cuts to vulnerable populations. We are reviewing the budget carefully."

Waterbury Hospital has similar reservations. "Any additional cuts or increased financial burden placed on hospitals will have serious implications on the healthcare environment of Greater Waterbury," a hospital spokesperson said in an email. "The governor's proposed budget should not be viewed in isolation, however. The unprecedented and rapid changes of healthcare reform require a comprehensive policy discussion to determine the best approach for configuring healthcare in Connecticut to meet dynamic community needs — not just a focus on Medicaid spending and payment."

Medicaid Cuts

The Medicaid cuts affect some of the 723,769 Connecticut residents were enrolled in Medicaid through a variety of different programs, generally called "HUSKY."

HUSKY A includes coverage for low-income adults with children. The governor's budget reduces the income threshold from 201 percent of the federal poverty level to 138 percent, or from $40,381 to $27,724 for a family of three. About 169,000 adults are in HUSKY A, and the lower income threshold would reduce those eligible by 34,200.

The threshold is already 138 percent of the federal poverty level for low-income, single adults without children. In the past 20 years, the income eligibility for HUSKY A has changed at various times. It was 100 percent, 150 percent and 185 percent of the federal poverty level at different points.

Additionally, the governor's budget eliminates part of the HUSKY B program. In effect, children of families with a household income of 323 percent of the federal poverty level or more, would no longer be able to participate. That would mean a family of three making $64,890 or more.

In 1998, Connecticut created a non-Medicaid Children's Health Insurance Program, essentially a buy-in option for families earning too much to qualify for the usual CHIP-subsidized coverage, according to the state Department of Social Services. Enrollment in the program has declined to fewer than 250 children at the end of 2014.

Part of the logic for reducing eligibility in the government-funded medical coverage is that Connecticut has a public health insurance exchange where people can buy a health plan and receive a federal subsidy if they make as much as 400 percent of the federal poverty level. However, Medicaid covers all costs and the private plans typically come with out-of-pocket expenses, such as co-pays, co-insurance, deductibles.